3 ways to sell real estate tax free!

As a general rule, if you sell a real estate property in the United States you will trigger a taxable transaction.  However, below are 3 situations when you might not incur an immediate  tax liability!

1/ A minimal capital gain

As a general rule, if you sell real estate property for a higher price than you purchased it, you realize a capital gain that is taxable. However, if you hold the property more than one year before selling it and your capital gain is $80K or less, your gain will be subject to a 0% tax rate (
long term capital gain tax rate)!

To read more about real estate tax deductions:

2/ A “1031 exchange”

If you sell a real estate property and re-invest the funds to buy another property, you can benefit from the special treatment of a “1031 exchange” . Under this treatment, your transaction will not be subject to tax at the time of the sale (deferral of capital gain). To qualify for this preferential treatment , you will need to use a qualified intermediary (“
a 1031 exchanger”) who will hold the funds from the sale in escrow until you purchase the new property.

To read more about the “1031 exchange”: 

3/ The sale of  a primary residence

When you sell your primary residence, the first $500K of capital gain are exempt from tax (
Home sale exclusion). If your property is rented, you might consider converting it to your primary residence before selling it!

To read more about other tax-free income:

To optimize your tax situation, make sure you contact your tax professional
Karine Bauer, EA for answers specific to your tax situation. As always, the views contained in this article are not tax or legal advice and are not a substitute for consulting with a tax professional. Karine Bauer, EA is an IRS Enrolled Agent licensed by the Treasury Department with unlimited rights to represent taxpayers before the Internal Revenue Service. Karine is also a Quickbooks Pro-Advisor and a member of the Association of Chartered and Certified Accountants (ACCA). She is an experienced tax professional with more than 20 years of international experience.

Bear in mind the date of this article as tax laws evolve over time.

Updated on : March 13th, 2022